Oil News: Mixed Demand Signals Pressure Prices Lower

Oil Prices Slip Amid Mixed Demand Signals

Oil prices are lowerl on Thursday as traders weighed mixed demand signals and inventory data. The market’s focus remains on China’s lackluster consumption and upcoming U.S. economic indicators.

At 09:36 GMT, Light Crude Oil Futures are trading $76.27, down $1.32 or -1.70%.

U.S. Inventory Draw

Wednesday’s Energy Information Administration (EIA) report showed significant draws in U.S. crude and fuel stocks. Crude inventories decreased by 3.7 million barrels, surpassing analyst expectations. Gasoline stocks dropped by 5.6 million barrels, while distillate stockpiles fell by 2.8 million barrels. Despite these bullish figures, oil prices failed to maintain upward momentum.

China Demand Concerns

China’s oil imports and refinery runs have trended lower in 2024 compared to 2023, reflecting weaker fuel demand amid sluggish economic growth. This persistent weakness in the world’s largest crude importer continues to pressure oil prices. Recent economic data and limited stimulus measures from Beijing have done little to improve sentiment.

Global Economic Outlook

Traders are closely watching upcoming U.S. GDP data and the PCE price index for insights into the economy’s health and potential Federal Reserve policy shifts. These indicators could significantly impact oil demand projections. Market participants are particularly focused on signs of economic cooling and implications for future interest rate decisions.

Geopolitical Factors

Efforts to reach a ceasefire in Gaza between Israel and Hamas have gained momentum, potentially easing geopolitical tensions. Meanwhile, wildfires in Canada’s Alberta province threaten oil production, with some companies evacuating non-essential personnel from oil sands sites. The fires have affected operations at facilities like Suncor’s Firebag and Imperial Oil’s Kearl, which together produce over 500,000 barrels daily.

Refinery Margins

Analysts note that refinery margins are being squeezed, with crack spreads falling to very low levels. This trend suggests a potentially weak earnings season for refiners, adding to market uncertainty. The pressure on margins could lead to reduced refinery runs, potentially impacting crude demand.

Supply Outlook

Looking ahead, concerns over a potential oil market surplus in 2025 are adding to bearish sentiment. Additionally, Canada’s proposed emissions cap for the oil and gas industry could significantly impact future production and investment in the sector.

Market Forecast

The short-term outlook for oil prices appears bearish. Mixed signals from U.S. inventory draws and persistent concerns about Chinese demand are likely to keep prices under pressure. Traders should closely monitor upcoming U.S. economic data and developments in Alberta’s wildfires for potential market-moving catalysts. The combination of these factors suggests oil prices may continue to face downward pressure in the near term, with potential for increased volatility as the market reacts to new economic data and geopolitical developments.

Technical Analysis

Light crude oil futures are lower, poised to challenge the 200-day moving average at $75.90. Watch for a technical bounce on the first test of this level. Some traders will be taking profits, others will be trying to pick a bottom.

If the 200-day MA fails then look for the selling to extend into the long-term 50% level at $74.61. This is half of the December to April rally.

The 50-day MA at $77.97 is resistance. Buyers would have to overcome this intermediate trend indicator to convince me that a short-term bottom has formed.